Developers go all out to build hotels by Euro 2012

As dusk settled across Kyiv, a blue construction crane fitted with spotlights continued to swing on Taras Shevchenko Boulevard in the center of the city. Working against darkness and sometimes rain, construction teams pressed on with work on the five-star Hilton hotel, set to open in time for the Euro 2012 soccer championship.

“We are doing everything possible to complete the project on time, however a hotel of this category is very difficult to finish in two years,” said Boris Fuksman, one of the new investors of the project. “But we are not giving up yet. We have a plan that will allow us to get it done in this period. At the moment this is the aim.”

The global economic crisis hit in 2008 and idled construction sites across Kyiv as financing dried up. But work on the Hilton restarted after Fuksman and Oleksandr Rodnyansky, founders of 1+1 television channel, bought a 50 percent share of the hotel project in March, according to Magisters law firm, which advised the businessmen. Hilton International is slated to be the operator of the $150 million project.

The Hilton is one of a number of projects now going ahead full throttle.

Colliers real estate consultancy, in its last market overview, listed another four hotel projects in Kyiv that should be finished ahead of Euro 2012 – the five-star Fairmont and Radisson Royal, four-star Holiday Inn and three-star Ibis. The new hotels should add some 1,400 new rooms.

Work is also proceeding in the other three cities that will host games for the European football championship. There are three new projects under development in Lviv, four in Donetsk and two in Kharkiv, according to real estate analysts.

Borys Fuksman

The list of new hotels in Ukraine in 2012 could have been even more impressive were it not for the economic crisis. With no financing available for hotels, around half of the project ideas remained on paper.

“We believe that the [building] process has started far too late. There has been too much talking, negotiating, haggling, arguing and too many obstacles have been put in front of willing developers and investors to get hotels built on time and on budget. Then came the crisis,” said David Jenkins, head of hospitality in Russia and the Commonwealth of Independent States with DTZ, another international real estate consultancy. “Now of course there is a sudden push for things to happen.”

The hotels under construction will mostly be used to house soccer fans during Euro 2012. The teams themselves and official guests will stay in existing hotels.

“On behalf of the UEFA [Union of European Football Associations] we have already contracted 90 percent of hotels. This work is almost done,” said Taras Demura, sales and marketing director for TUI Ukraine, the Ukrainian arm of the championship’s official travel operator. “As far as fans are concerned, this work is only starting now. We work actively on selecting all sites on the Ukrainian market where it’s possible to host fans. These are tourist resorts, camp sites, dormitories, flotels (hotels on the water) and boats. Plus a lot of hotels are being built now, and investors are actively allocating capital for hotel construction,” Demura said, adding that sales of trip packages will begin no earlier than the end of 2011.

Most market players agree, however, that Euro 2012 is not the true reason behind the surge in hotel construction, but rather provided a timely boost and good public relations opportunity for entering the market.

The real reason is that the hotel market is in an embryonic state. In Kyiv, only three hotels are managed by international networks. The city would need at least eight such hotels for the market to be considered mature, according to Colliers.

Demura said the quality, particularly of low-star hotels, is a concern. “I have no doubts that hotels such as the Hyatt, Radisson and Premier Palace all correspond to international standards,” he said. “I am more concerned about the local three-star hotels that are not included in any chain. Sometimes what you see here is horrible.”

For instance, Demura said, Ukrainian hotel rooms may be large, but are often badly equipped and furnished. Electrical sockets may be near windows and covered with curtains, forbidden by European fire code.

There are plans to renovate a number of outdated hotels.

“All this work is being done not for the sake of the championship, but more for its resonance,” Demura said. “Everyone hopes that 600,000 fans will come here and tourism in Ukraine will have the chance to advertize itself. It could give Ukraine a push, a trampoline for its further development.”

Kateryna Demyanchuk, a consultant at Colliers International, also confirmed that no one hotel in Ukraine is being built especially for the championship.
“One hotel manager said, ‘With all respect to the football championship, no one would build a hotel for the sake of 12-14 days of football matches.’ If a developer allocates $100,000-$200,000 per room built, then to get a return on this investment, even in Kyiv, requires not less than six-seven years.”

But there’s no developer or operator who would want to miss out on the boost from Euro-2012, she added.

Planned high-end hotels in Kyiv 2010-2012
5 stars: Fairmont 257 rooms, 1A Naberezhno-Khreshchatytska St.
3 stars: Ibis, 215 rooms, 25 T.Shevchenka Av.
3-4 stars: Holiday Inn, 210 rooms, 79 Antonovycha St.
4-5 stars: Radisson Royal, 425 rooms, 35-37 V.Vasylkivska St.
5 stars: Hilton, 257 rooms, 28-30 Taras Shevchenko Boulevard.
(Source: Colliers International)

Kyiv Post staff writer Oksana Faryna can be reached at faryna@kyivpost.com